Capita Share Price Traded Sideways on the Latest Trading Update

The Capita PLC (LON: CPI) share price traded sideways after releasing its latest trading update for the 11 months to 30 November 2023. Capita plc has reported a notable improvement in its operational performance and financial outcomes for the review period. The company's revenues edged higher on new government contract wins.

The company experienced a 2.1% increase in adjusted revenue growth despite a slowdown in the second half of the year compared to the first. Contract delays and losses in the Local Public Services sector slightly offset this growth.

Significant achievements include winning contracts with a total value of £2.89 billion, marking a 47% increase from the previous year. The win rate for new contracts and expansions has impressively risen to 70%. 

Notable contracts include renewals with Virgin Media O2, the British Army’s Recruiting Partnering Project, and expanded agreements with the Department for Work and Pensions and the Department for Education.

Capita has also made strides in efficiency, with a plan to reduce overhead costs by £60m annually starting from the first quarter of 2024. This strategy supports their objective to more than double the Group's operating margin and establish sustainable positive free cash flow in the medium term.

Capita has also completed the disposal of its Travel business and agreed to sell its stake in Fera, which is expected to be finalised in early 2024. These disposals have fortified Capita's balance sheet, with over £100m received this year and an additional £62m anticipated from the Fera sale.

The company expects to recognise £27m in redundancy costs due to the cost-saving program, with the cash impact primarily occurring in the first quarter of 2024. Despite a free cash outflow of £53m in the first half of the year, Capita anticipates a shift to positive free cash flow. 

Jon Lewis, Chief Executive Officer, said: “We have continued to make good progress against our core priorities and remain on track to deliver our medium-term guidance of mid-single digit revenue growth, doubling our operating margin and delivering positive free cash flow. We have stronger client relationships, as demonstrated by our material growth in TCV won and continued strong cNPS scores. Capita is a growing business with a materially stronger balance sheet, reflecting the reductions in financial debt and pension deficit.”

Capita share price. 

Capita Plc's share price traded sideways on its latest 11-month trading update.